Loan Questions for a Seller Financed Loan

Member since 2024 · 5 posts · 1 vote

I'm new to this so please bear with me. If I was interested in purchasing a seller financed home with the total price of say $700,000, could the loan be structured to pay off say $150,000 to the seller over a 4-year period with the remaining due after that period? For example, I would need a new loan from a bank for the remaining $550,000 after the 4 years or would refinance the house for the $550,000, correct? This is assuming the house is paid off prior.

The idea here is to pay off the principal of the $700,000 over the four period then when I get a loan for the remainder $550,000 it would be more affordable. Thanks in advance!

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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
2y
Anything is possible. Buy with seller financing with terms that allow a 48-month principal payment of $150,000 and you've achieved your first question. Keep in mind, that's a $3,125 principal payment per month. If you can do that, fine. But also realize the seller will want (most likely) some interest as well. Also make sure your contract allows for obtaining financing after the initial seller financing term. Depending on the desperation of the seller, the terms of the financing may change.
You don't identify what state you are in so make sure your seller financing terms don't conflict with your state statutes. More importantly, we don't know 1) your capability to pay 2) the seller "requirements" or needs, 3) property condition / collateral valuation and 4) why you don't just buy traditionally.
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Jason Sullivan
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Member since 2024 · 5 posts · 1 vote
2y
Thanks for the detailed response! The state is California. These are some ballpark numbers, but I was thinking around 5 percent interest rate. So, if my math is correct, that would be $3,454 payment a month.
The reason I'm looking away from traditional financing is to achieve a lower monthly payment. The seller is in a unique situation and may be willing to work a deal with me that would help me make this possible. In my mind, if I can lower the 2nd loan amount by paying down the principal in the first 4 years, it would be a more affordable payment. Albeit it would take me four extra years to pay off the house.
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
@Jason Sullivan
Anything is possible but to get the seller to finance a transaction at 0% interest is highly unlikely
Has the seller even acknowledged they would consider seller financing?
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
2y
What you are looking for is a balloon payment. You're describing $150K down, the balance amortized at a 30 year rate with a 4 year balloon.
From a financing prospective, 0% interest is a pretty aggressive ask, but you never know if you don't try. I've seen plenty of those deals over the years. The key is to solve the sellers problem, whatever that is, and the terms will fall in to place.
Best of luck!
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Jason Sullivan
OP
Member since 2024 · 5 posts · 1 vote
2y
Thanks for the responses. The idea of seller financing is being considered but the terms have not been discussed. I would offer interest on the original loan (thinking 5 percent).
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